Are you looking for stocks to buy and hold forever in your TFSA?
If so, you should focus on quality.
Established companies with strong competitive positions often deliver consistently good business results. The end result of this can be several decades of dividend growth and compounding. In such a case, long-term stock price appreciation may follow.
If you’re going to be holding stocks, one of the best environments to hold them in is a tax-free savings account (TFSA). A TFSA provides a tax-free environment in which to hold stocks and other assets, which increases your long-term returns. In this article, I will explore some stocks that may be worth buying and holding forever in a TFSA.
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Fortis
Fortis Inc (TSX: FTS) is a Newfoundland-based utility company that holds a number of electrical utilities across Canada, the United States, and the Caribbean. The company has $77 billion worth of assets and 9.9 million customers. It owns nine utilities in all.
Fortis has several things going for it, some of them shared by utilities as a group, but others unique to the company.
First off, the company has a track record of stable and consistent revenue. Most regulated utilities have this advantage, as they usually function as government-regulated monopolies providing essential services. However, not all utilities provide consistent, growing profits, as Fortis has done, resulting in it outperforming the TSX utilities index averages over the decades.
There are several things that distinguish Fortis from other Canadian utilities. First, it is financially responsible, keeping its dividend payouts below its earnings. This leaves it with money to invest back into its business. Second, Fortis does invest in its business, having acquired eight utilities over the decades. Currently, the company is embarking on a $28.8 billion capital spending plan it says will increase its rate base by a 6.5% CAGR over several years. Overall, it remains one of Canada’s best run utilities.
TD Bank
The Toronto-Dominion Bank (TSX: TD) is Canada’s second biggest bank. One of Canada’s most widely owned stocks, it is also quite possibly one of the best. The bank has conservative lending standards, avoiding overly risky projects. It has a 14.5% common equity tier one (CET1) ratio, which indicates that it has a lot of capital to cover potential outflows. Finally, TD has a strong brand and a high level of trust nation-wide, which provide cause to think that the good things will continue going forward. Overall, it’s one of my favourite long-term holdings.
Brookfield
Next up we have Brookfield Corp (TSX: BN), a Canadian financial services conglomerate whose shares have tumbled this year. Brookfield operates in several areas of the financial services industry, including asset management, insurance, real estate, renewable energy, and infrastructure. The company’s stock trades at about 17 times distributable earnings, which is a reasonable valuation for its sector. The company’s asset management arm has $78 billion worth of committed capital that hasn’t yet been invested, and has invested billions for its clients over the last year. There is potential for considerable growth here. So, I’d say Brookfield is a pretty good long-term hold.
